• The KLCI closed the year at 1,690.58, a loss of 5.9% against end-2017.

• Market ended the year with an 11 straight days of net foreign outflow, resulting in a December ouflow total of RM1.0bn versus -RM719.1m in November.

• For 2018, net foreign outflow amounted to RM11.8bn, as opposed to RM10.7bn net inflow for 2017. Interestingly, the local buying was skewed towards retail investors which accounted for 54%.

• Generally, the net foreign outflow for 3 quarters of 2018 had a significant impact on 2H18’s market performance.

The KLCI recovered some ground, -5.9% for 2018

The KLCI ended a tumultuous year falling 5.9% at 1,690 having made some ground during the final week of December. Having made a new high of 1,896 in April the KLCI experienced a sell off that saw the index falling as much as 14% from the peak.

As discussed in our recent report, the 3 key factors that contributed to the market’s weak performance, especially in 2H18, was investors’ concern on global growth, US-China tariff impact, and slowing earnings growth.

We believe these factors, coupled with US interest rates will remain as the main themes for markets in 2019. Another cause for concern is crude oil price, i.e. Brent which slipped to USD49.93 per barrel, dropping below USD50 first time since July 2017.

Foreign flows for 1Q historically better for Malaysia

Contrary to popular belief, the 4th quarter had always brought foreign selling pressure on Malaysian equities since 2014. The exception was in 4Q2017 when a small net inflow of RM781m was recorded. Conversely, the Malaysia market had always fared better, from a net foreign buying perspective, during the 1st quarter of the year.

We think net foreign flows could be mixed in January as a stronger ringgit versus USD expected during the month would stem any substantial outflow.

Source: BIMB Securities Research - 2 Jan 2019